Exam 10: Exchange Rates and Exchange Rate Systems

In the short run,exchange rates are most directly affected by which of the following?

When an economy is closely tied to another,larger economy,floating exchange rates are usually desirable.

According to the text,which of the following factors may make the theory of purchasing power parity unrealistic?

Under a pure gold standard,

If U.S.consumers increase their demand for foreign products and foreign travel,the U.S.dollar would tend to depreciate as more dollars are supplied to foreign exchange markets.

Which of the following defines a flexible exchange rate?

An American firm that buys foreign exchange because its managers expect the dollar to depreciate is

The Bretton Woods exchange rate system was an example of a

When most shocks to the economy are external,it is generally better to have

If the forward rate is greater than the spot rate,what are markets signaling about their expectations for the future spot rates for the home currency?

How is dollarization different from monetary union?

Most currency trades in London do not involve the British pound.

What matters most to importers and exporters is the nominal exchange rate.

When the purchasing power of currencies is the same,

Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity.If the law of one price holds perfectly,then differences between U.S.and Canadian rates of inflation would

If the Costa Rican colone is expected to depreciate in the future,it will temporarily appreciate as people move to take advantage based on this expectation.

Which of the following is a FALSE statement concerning purchasing power parity?

When Jeneva went to Costa Rica in July 2008,a U.S.dollar was worth 550 colones.If today a U.S.dollar is worth 650 colones,it means that the U.S.dollar has depreciated against the colone.

If Juana contracts to buy U.S.office equipment in U.S.dollars and her domestic currency depreciates against the U.S.dollar between the time the contract is signed and the bill is paid,she will wind up paying less for the equipment because she stayed in the spot market.

If the dollar/pound exchange rate is $2/£,a Big Mac costs $5 in New York City and costs £4 in London,the pound is ________,and U.S.tourists will be ________.